Canadian Couch Potato reports on an effort to allow mutual fund advisors to recommend ETFs. If this happens, I suspect that initially most mutual fund advisors would only recommend ETFs when they would lose the client otherwise. But, over time, this may lead to positive changes. If ETFs come to dominate, either advisors will have to figure out how to charge their clients directly for advice (a good outcome), or ETFs will have to start making direct payments to advisors (a bad outcome). Preet Banerjee says it’s time to toughen the standards for being able to call yourself a financial advisor. Retire Happy Blog wants you to try the 7-day spending challenge and implores you to “Stop buying crap!” Big Cajun Man has some scary two-sentence financial horror stories from his readers. Million Dollar Journey updated his advice on how to invest small amounts each month. Personally, I think it makes more sense to just save cash for a couple of months before investing. But some p...

Long-time readers of this blog may recognize that this post title has appeared here before. That’s because I’m reviewing the sixth edition of Charles D. Ellis’s excellent investing book Winning the Loser’s Game , and I reviewed the fifth edition a few years back . I was pleased to reread the familiar parts and see the new material written in Ellis’s clear and convincing style. The main message of this book is that trying to beat the market is a loser’s game because “professional investors are so talented, numerous, and so dedicated to their work that as a group they make it very difficult for any one of their number—and virtually impossible for amateur investors—to do significantly better than others, particularly in the long run.” Some accuse mutual fund managers of being unable to beat their benchmarks because of various failings such as having a short-term focus. Ellis says that the real reason mutual fund managers can’t get an edge is because they and other professional inve...

My posts for this week: Playing the Winner’s Game Currency Exchange at BMO Investorline Here are my short takes and some weekend reading: Canadian Couch Potato reviews the latest crop of Canadian ETFs from Vanguard. VCN looks quite interesting as an alternative to Vanguard’s VCE or the iShares XIU for those investors who want to add exposure to mid- and small-cap Canadian stocks. Million Dollar Journey shows young investors just starting out where to find commission-free ETFs. Canadian Mortgage Trends tells the story of a credit union unwilling to eat mortgage brokers’ commissions; the mortgage rate it advertises directly to the public is lower than the rate it offers to clients of mortgage brokers. My Own Advisor explains why dividends matter to him. I think the most important reason why dividends matter is somewhat self-fulfilling. If dividends matter to you and they help you stick with your plan and not sell near a market bottom, then dividend investing can be g...

Currency exchange is typically a lot more expensive than many people realize . Paying somewhere close to 1% for each exchange may not sound like much, but if you switch back and forth between Canadian and U.S. stocks over the years, you’re paying this cost on the same capital multiple times. Your total cost over decades could easily grow to over 10% of your savings. One method of saving on exchanging Canadian and U.S. dollars, called the Norbert Gambit , involves using an equity that trades in both Canadian and U.S. dollars. You simply buy the equity in one currency and sell it in the other currency. Instead of paying hidden fees baked into your broker’s exchange rates, you pay two trading commissions and bid-ask spreads. Because my employer pays me in Canadian dollars, my new savings are in Canadian dollars, and I occasionally need to exchange some of them for U.S. dollars to maintain my desired asset allocation in my overall portfolio. I recently did this again at BMO Invest...

Larry Swedroe now has a Canadian Version of his book Think, Act, and Invest Like Warren Buffett , created with the help of PWL Capital . The Canadian Version is called Playing the Winner’s Game. This excellent book is now more relevant to Canadian readers. Much of my review of the U.S. version of the book still applies. After all, sound investment principles are much the same no matter where you live. The main difference with the new book is that examples are based on Canadian investments. In the main set of example portfolios, Canadian stocks are used and real estate is used in place of commodities. There are still a couple of places where U.S.-specific advice was not updated in the Canadian version. There are references to U.S. social security and long-term capital gains taxes (we don’t have different tax rates on long- and short-term capital gains in Canada). This is a great book to get solid investing advice without much technical discussion. And now it is even better...

This week I compared dividend investing to index investing: Dividend Investing Advantages and Disadvantages Here are my short takes and some weekend reading: Canadian Couch Potato offers a tongue-in-cheek guide for mutual fund salespeople to argue against index investing. Tom Bradley at Steadyhand gives some interesting perspectives on real estate by comparing today’s low interest rates and high prices to a time in the past when prices were low but interest rates were very high. Big Cajun Man warns the young about lifestyle creep. My Own Advisor updates us on his progress to building passive income with dividends.

Frugal Trader at Million Dollar Journey wrote a thoughtful post titled 5 Advantages of the Dividend Investing Strategy that caught my attention. He believes that both index investing and dividend investing are good strategies. I’m not sure if he intended his 5 advantages of dividend investing to be advantages when compared to index investing, but I’ll take them this way below. Let’s examine each of these 5 advantages: 1. Produces a Passive Income Stream for Life, and with Raises! Dividend stocks certainly produce passive income that tends to rise over time. However, indexing does the same thing. Dividend stocks produce bigger dividends, but indexes tend to produce bigger capital gains. So, I’d say that this advantage applies equally to both dividend investing and index investing. 2. Encourages Buying and Holding for the Long Term I suspect that this is where dividend investing has an edge over index investing, at least for some investors. No matter how you invest, it’s...

Here are my posts for this week: 9000% Per Day! Ratios to Rate Your Personal Finances Here are my short takes and some weekend reading: Canadian Couch Potato explains why losses in your bond fund may be just an illusion. Preet Banerjee defends index investing against flawed attacks. Big Cajun Man is running an interesting contest to win some Quicken software. I might try this sort of contest myself sometime. My Own Advisor is considering making fewer extra lump sum payments on his mortgage so he can invest more. Perhaps a middle-of-the road approach makes sense. Instead of making extra mortgage payments to pay it off in 8 years, try 10 years.

Don at My Dollar Plan wrote a post about 4 ratios to rate your personal finances . I thought I’d see how our family finances fare in this test and maybe learn something new. For each ratio, Don gives a recommended minimum or maximum level. Here goes. Liquidity Ratio = Liquid Assets / Monthly Expenses Our family comes in at 6.2 months right now, but this figure varies over time from about 4 to 8 months. I usually let cash sit in trading accounts until it builds up to about $5000, at which point I buy some ETF that’s below its target allocation in our family portfolio. The amounts in each account vary over time, but the total of all these amounts has some stability. We almost always have less than the 10 months of living expenses that Don recommends. I’m not too concerned because I have a large line of credit available and could also sell off some ETFs in non-RRSP accounts if necessary. Savings Ratio = Savings / After-Tax Income Don actually had gross income in the deno...

Google does a good job of filtering spam comments out of Blogger, but I still have to delete several per day. Some of these spam commenters are clever and include key words from the post they are commenting on. However, a recent spammer’s pathetic effort just made me laugh: “Fast Return Investment-9000% after 24 hours.” With all the warnings we see about being wary of offers that are too good to be true, I’d hope that nobody would get caught by something this ridiculous. But let’s daydream a little. What if we could roll over an investment to make a 9000% return compounded each day. Starting with one dollar, let’s see how our wealth would grow: After 7 days : The dollar would grow to over $50 trillion! We’d be able to pay off the U.S. national debt with plenty left to spare. After 15 days : Our wealth would be roughly equal to a block of gold the mass of the Earth. After 41 days : We’d have about a dollar for every electron in the known universe. I pity any person who...

This week I explained a hidden cost of trying to mimic an index with a subset of stocks: Building Your Own Index with Individual Stocks Here are my short takes and some weekend reading: Canadian Couch Potato explains research showing that portfolios of index funds tend to outperform portfolios of actively managed funds. The gap is bigger than when you just compare individual funds. Financial Crooks tells the story of replacing a rented hot water heater with one that was purchased. My Own Advisor reviews Ellen Roseman’s book, Fight Back . Big Cajun Man asks whether draining the old bottle of fabric softener into the new bottle is thrifty, frugal, or cheap. I have a different answer because I’m allergic to the stuff. It’s even cheaper to just use white vinegar in place of fabric softener.